CIBC Analysts On Valeant: Questions Still Unanswered After Investor Day

• Valeant Pharmaceuticals Intl Inc VRX recently held its investor day, where management provided revised guidance, in line with estimates.
• Following the event, CIBC analysts Prakash Gowd and Ryan Lee issued a Sector Perform rating and $90 price target on the shares.
• The experts assured they still had unanswered questions regarding the company’s relationship with Walgreens Boots Alliance Inc WBA.

After attending Valeant’s investor day, analysts at CIBC assured a few questions remained unanswered – especially those regarding the company’s 20-year deal to cut prices for Walgreens. Below are the three main interrogations for which the experts found no answer:

1)   The new fulfillment agreements help make up for the lost Philidor revenue, while providing a venue for the company’s patient assistance program. Nonetheless, margins for these sales are lower – but management would not comment on this issue other than to say their internal assumptions are conservative.

2)   The analysts do not fully understand –still- why is it that Valeant opted for the Walgreens agreement instead of going for another "specialty pharmacy" deal. Coincidentally, the experts noted, during CVS Health Corp CVS’s Investor Day, management said that 90 percent of Valeant’s products were either “excluded from its formulary or considered ‘non-preferred.’” Valeant declined to comment on this, but CIBC analysts “wonder if the company's relationship with PBMs has been negatively impacted by pricing issues and the Philidor problems.”

3)   The experts believe that sales through other pharmacy channels will see a decline since customers will be able to purchase the same drugs at Walgreens, at lower prices and with copay assistance – Valeant does not offer the program through other pharmacy channels for now.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.